Thoughts on Alaska Oil & Gas

Senator Gary Stevens on proposed oil tax cuts: “Inexcusable truthfulness’, Alaska Dispatch, Dec. 15, 2011.

Thank you for inviting me to speak. Frankly, you’ve got a lot of nerve. I stand before you as the recipient of an “F” from the Alaska Chamber of Commerce and the Resource Development Council. Legislators were given grades by these organizations — apparently based on our support or lack of it for the governor’s oil tax bill, HB 110.  So, the biggest issue facing the Legislature this year is state oil taxes. Big surprise, right?  This has been the biggest issue for many years running.

All Representatives who got A’s voted for the governor’s oil tax bill, while those of us who got D’s and F’s either voted against it in the House, or like myself, dared to question it in the Senate.

… and so the speech starts.  Whether you agree with Senator Stevens or not, this is an important piece that deserves respect and reflection. Personally, I think the Legislature needs to start thinking in new ways about these issues. But in preparing to think about them in new ways, we need to understand the old and this is a very clear articulation of the basis for one point of view.

The World Trade Center Alaska announced late last week that Sujuan He, the Chief Representative of SINOPEC USA and the President of UNIPEC America, Inc., the oil trading arm of SINOPEC in the US, will speak at the 7th Annual Alaska-China Business Conference Wednesday of this week.  Given the increasingly significant level of Chinese investment in world  — and even US — oil development and especially given the Governor’s new interest in LNG exports, hearing SINOPEC talk about Alaska may be quite interesting.

Registration details are at World Trade Center Alaska.

An article in yesterday’s Economist — The oil business: Big Oil’s bigger brothers — helps bring into focus the significant — and successful — role played by State oil companies.  When viewed in a global context, partially or wholly state owned oil companies increasingly are controlling the pace of world oil development.

Is Alaska being left behind because it has no similar driver?  There are bad examples of such enterprises, granted.  But there also are major success stories.  By co-investing alongside industry, Norway’s Statoil and Petoro and Brazil’s Petrobras are driving investment in their region’s resources.  Could Alaska do the same?

About State Oil Companies:  The oil business: Big Oil’s bigger brothers, The Economist (Oct. 29, 2011).

More about Petoro:  Petoro call for mature decisions, Upstream (Oct. 28, 2011).

Personally, I have never believed in the “Peak Oil” theory.  Why?  Because over my career, just when it seems the limits of the resource appear to have been reached, the industry time and again has developed new technologies to break through yet another seemingly insurmountable barrier and open up new opportunities.

The current shale gas revolution is a prime example.  Six years ago — 2005 — the talk throughout the industry was that US gas supplies were in inevitable decline, and significant quantities of imported LNG would be necessary to meet the country’s ongoing needs.  Now, as a result of technological breakthroughs in the development of shale gas resources US gas supplies have reached a level where the talk throughout the industry is about US gas supply exports.

The post at the following link by Martin Lamonica, a senior writer for CNET’s Green Tech blog, helps to make the point, and indeed suggests that “Fossil fuels may be out-innovating green tech.”  The post — and the links included in it — are worth the read.

Look out: Fossil fuels may be out-innovating green tech | Green Tech – CNET News, CNET (Oct. 29, 2011).

Ever wonder who Alaska competes against for investment dollars. The following article — New Technologies Redraw the World’s Energy Picture — provides a great overview of the new technologies that are redrawing the world’s oil and gas industry and attracting investment away from places like Alaska.

New York Times, Oct. 25. 2011

GOLDA MEIR, the former prime minister of Israel, used to tell a joke about how Moses must have made a wrong turn in the desert: “He dragged us 40 years through the desert to bring us to the one place in the Middle East where there was no oil.’ ”

As it turns out, Moses may have had it right all along. In the last couple of years, vast amounts of natural gas have been found deep under Israel’s Mediterranean waters, and studies have begun to test the feasibility of extracting synthetic oil from a large kerogen-rich rock field southwest of Jerusalem.

Israel’s swing of fate is just one of many big energy surprises developing as a new generation of unconventional fossil fuels take hold. From the high Arctic waters north of Norway to a shale field in Argentine Patagonia, from the oil sands of western Canada to deepwater oil prospects off the shores of Angola, giant new oil and gas fields are being mined, steamed and drilled with new technologies. Some of the reserves have been known to exist for decades but were inaccessible either economically or technologically.

Read the full article here  …

Earlier this month I wrote and published here a commentary on Why I am going to Norway.  This is the week that the Institute of the North policy tour is in the country.  Nils Andreassen, the Managing Director of the Institute, is posting daily notes on the meetings underway as part of the tour.  A link to those notes and the initial draft of the trip report is available here.

For my small part, I will post daily updates on the important points I am taking away  (in 140 characters or less) here, at my Facebook page and at the Perkins Coie Alaska Oil & Gas page .  At the end of the tour, I will gather my notes into a commentary on “What I learned from Norway.”  For the moment, however, please read below or click on either source to follow what, to me, are the important daily points of learning. Continue reading →

In an Anchorage Daily News’ Compass piece today, Les Gara charges that some have “engaged in the politics of deception and personal attack” on him and Sen. Hollis French.  He says “[p]eople are entitled to their opinions. But they are not entitled to make up their own facts.”

Funny, “deception, personal attack and making up his own facts” was exactly the approach Les himself was taking just the other day in responding to a piece that I wrote for these pages, which later was reprinted by the Alaska Dispatch (“North Slope employment study:  Useful, but not determinative“). Continue reading →